If the Absolute Value of the Price Elasticity of Demand

question 318

Multiple Choice

If the absolute value of the price elasticity of demand for a product is 2, and the price of a product increased 10 percent, then the quantity demanded will decline by

• A) 20 percent.
• B) 10 percent.
• C) 5 percent.
• D) 2 percent.

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Definitions:

Gross Profit

Gross profit refers to the difference between revenue and the cost of goods sold before administrative, overhead, and other expenses.

Receivables Turnover Ratio

A financial metric that measures a company's effectiveness in extending credit and collecting debts, calculated by dividing net credit sales by the average accounts receivable.

Net Sales

The amount of sales revenue remaining after deducting returns, allowances for damaged or missing goods, and discounts.

Accounts Receivable

Funds that customers owe to a business for products or services that have been received but remain unpaid.